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Gold Modestly Higher-Lifted By Weak U.S. Retail Sales, But Gains Limited By Firmer U.S. Dollar

(Kitco News) - Gold prices have moved to modestly higher levels in early U.S. trading Tuesday. The metal got a lift from a just-released U.S. retail sales report that showed only tepid growth and did not meet market expectations. However, gains are limited by the recent sharp rebound in the value of the U.S. dollar against the Euro currency. June gold was last up $1.70 at $1,297.50 an ounce. Spot gold was last quoted up $2.80 at $1,299.00. July Comex silver last traded up $0.022 at $19.57 an ounce.

U.S. retail sales in April rose by just 0.1%, missing the expected growth rate of 0.4%. Gold moved up from lower levels in the immediate aftermath of the report, as it falls into the camp of U.S. monetary policy doves.

The closely watched German ZEW economic expectations index was released Tuesday and saw confidence decline in May for the fifth month in a row, at 33.1 versus 43.2 in April. The German Bundesbank on Tuesday threw its support behind a likely upcoming move by the European Central Bank to ease its monetary policy. The Bundesbank is very worried about price deflation in the European Union. That news helped to sink the Euro currency and in turn boost the U.S. dollar index to a five-week high Tuesday.

The Russia-Ukraine situation has not changed much recently, as the market place views it. While tensions are still high in the region, traders and investors have become lackadaisical on the matter. Such is evident by rallying world stock markets, including U.S. indexes hitting all-time highs Monday. It will take a major new development in the situation to shake the market place out of its malaise regarding the Ukraine-Russia conflict—which is likely to occur at some point down the road.

In overnight news the Organization for Economic Cooperation and Development (OECD) reported China’s economic growth rate will continue to slow in the coming months, while other countries’ economies will see steady growth. Meantime, China’s industrial output grew by 8.7% in April, year-on-year, but was below expectations. To repeat what I’ve said many times, China’s economic numbers (if one can believe them) are still the envy of the major world economies. I suspect the bigger worry is that China’s ballooning economy comes with its financial system that is untested during the boom times. Economic history shows that booming economies are followed by busts—and as they say, the bigger they are the harder they fall.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the NFIB small business optimism index, import and export price indexes, retail sales, and manufacturing and trade inventories.

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

The London A.M. gold fix is $1,292.75 versus the previous P.M. fixing of $1,298.75.

Technically, June gold futures bears have the slight overall near-term technical advantage. Price action Monday did score a bullish “outside day” up on the daily bar chart—whereby the session’s high was higher and low was lower than the previous day’s trading range, with a higher close on the day. That suggests this market could continue to trade sideways and choppy, in a range. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the May high of $1,315.80. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at the April low of $1,268.40. First resistance is seen at $1,300.00 and then at Monday’s high of $1,304.50. First support is seen at the overnight low of $1,289.10 and then at $1,280.00.

July silver futures bears still have the solid overall near-term technical advantage. However, prices could be “basing” at lower price levels, to begin to suggest a market bottom is in place. Prices are still in a 2.5-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the May low of $18.685. First resistance is seen at Monday’s high of $19.67 and then at last week’s high of $19.77. Next support is seen at the overnight low of $19.365 and then at $19.25.

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